Japanese Investors Withdraw from Overseas Bonds Amid Yield Changes

Japanese investors significantly withdrew from overseas bond markets in February, marking the largest scale in 16 months. According to Jin10, this shift was driven by declining U.S. Treasury yields and rising yields on Japanese bonds, making local bonds more attractive. Data from Japan's Ministry of Finance revealed that last month, Japanese investors net sold 3.07 trillion yen ($19.37 billion) in overseas bonds, the largest monthly net sale since October 2024, when they sold 6.5 trillion yen. In particular, Japanese investors sold 3.42 trillion yen worth of foreign long-term bonds, reaching a 16-month high, while simultaneously net purchasing approximately 352.1 billion yen in foreign short-term bonds. Additionally, Japanese investors net bought 642.1 billion yen in foreign stocks in February, marking the second consecutive month of net purchases. Barclays noted that this buying spree was primarily driven by demand related to Japan's individual savings accounts (NISA). NISA is a tax-free stock investment plan introduced by the Japanese government to convert trillions of yen in household cash into stock market investments. Another report from the Bank of Japan indicated that in January, Japanese investors net purchased 279.4 billion yen in U.S. Treasuries and 660.96 billion yen in European bonds.